[Costs and cost analysis].

Abstract

The costs of an activity is frequently the most conspicuous part in decision making when changes in health care services are considered. It is thus essential to be aware of the principles and considerations underlying the composition of costs. The concept of cost is not restricted to expenditures that have to be paid. It involves the notion of opportunity cost i.e. the cost of a service is the satisfaction or benefit foregone in not being able to use the resources involved to obtain some other service which is also desirable and therefore also provides satisfaction. Strictly, this relates to the best alternative way of using the resources. In order to estimate the costs of an activity, all costs, whether direct or indirect, tangible or intangible, ought to be taken into account. The fact that they may be difficult to measure a value is no excuse for ignoring them. In a cost analysis the result has to be assessed in the light of the types of costs employed and the aim of the analysis. Average cost is very often used, but is seldom the relevant costs. What is normally of concern is the cost of some change. Only by using marginal costs i.e. those costs that actually do change is it possible to obtain a true picture of resource consequences of that change. Regardless of the type of cost it is necessary to consider on whom the costs fall and to whom the benefits accrue. These may not be the same.